When ESG Disclosure Pays but Markets Look Away: Evidence from Vietnamese Commercial Banks

Purpose. This study examines whether voluntary environmental, social, and governance (ESG) disclosure improves the financial performance of commercial banks in an emerging market, and whether the effect differs between accounting-based and market-based performance. Design/methodology. Using an unbalanced panel of Vietnamese commercial banks over 2010–2025, we construct a voluntary ESG disclosure index from annual and sustainability reports through content analysis across the environmental, social, and governance pillars. Financial performance is captured by two accounting measures (ROA, ROE) and two market measures (Tobin’s Q, price-to-book). We estimate fixed-effects models for the accounting measures and random-effects models for the market measures, based on F, Breusch–Pagan and Hausman tests, with bank-clustered robust standard errors; we address multicollinearity through a reduced-form specification and endogeneity through a two-step system GMM estimator. Findings. Voluntary ESG disclosure is positively and significantly associated with accounting performance—most strongly with ROE (β = 0.0021, p < 0.01)—and the effect on ROA becomes significant once multicollinearity between disclosure, size and age is mitigated. In contrast, ESG disclosure shows no significant association with either market measure. The positive effect on accounting performance is confirmed by a dynamic system-GMM estimator that controls for endogeneity. Leverage, bank age, liquidity, media pressure and CEO stability are additional determinants of accounting performance. Originality/value. The study provides among the first long-window (16-year) evidence for a frontier banking market and documents a disclosure–performance asymmetry: banks are rewarded in their books but not (yet) in their market valuation, indicating that the capital market has not yet fully priced sustainability transparency.